Consolidations Ch 4

Why may noncontrolling interest shares sell at a price less than shares recently sold that transferred control to an acquirer? a. noncontrolling interest shares are not traded after a business combination b. noncontrolling interest shares no longer carry the benefit of transferring control to a new owner c. obtaining a controlling interest adds a valuable benefit to the acquirer

BC

Which of the following are identified and measured by an acquiring firm as of the date of a 90% subsidiary acquisition a. noncontrolling interest at acquisition date fair value b. goodwill or a gain from bargain purchase c. 100% of all subsidiary assets and liabilities at full fair values d. 90% of all subsidiary assets and liabilities at full fair value

ABC

In consolidated financial reports, the ______ _____ represents a set of owners, in addition to the parent company, who have a legal claim to the subsidiary's net assets

noncontrolling interest

What new financial statement balances are created in the consolidation process with NIC?

noncontrolling interest in xxx consolidated net income net income attributable to noncontrolling interest

When a parent company employs the equity method, consolidation Entry D eliminates subsidiary dividends attributable to the _____ company

parent

T/F In periods subsequent to acquisition, NCI valuation in consolidated financial reports is based on acquisition date fair value adjusted for the NCI's share of post acquisition adjusted sub net income less dividends

true

What impact does the presence of a control premium have on the calculation of the noncontrolling interest

the amount of goodwill from the combination is included disproportionately in the total noncontrolling interest

How does consolidation entry A1 allocate the unamortized excess acquisition date fair over book value for the sub's identifiable asset and liabilities to the noncontrolling interest a. all of the excess unamortized acquisition fair value is allocated to the noncontrolling interest b. the excess unamortized acquisition date fair value is allocated to the noncontrolling interest using their percentage ownership in the subsidiary c. none of the excess unamortized acquisition date fair value is allocated to the noncontrolling interest

b

When the fair values of the sub shares owned by the controlling and noncontrolling interests are equal at acquisition date, then a. any resulting goodwill be recognized proportionately across the two ownership groups b. the parent has not paid a control premium for its proportional interest c. the parent has paid a control premium for its proportional interest

AB

The beginning balance of the noncontrolling interest can be viewed as the NCI's ownership share multiplied by the sum of which of the following two components? a. unamortized excess acquisition date sub fair over book value as of the beginning of the period b. the fair value of the sub as of the beginning of the period c. the book value of the sub as of the beginning of the period d. the acquisition date excess fair over book value for the sub

AC

T/F quoted prices in active markets are required to properly value the equity shares held by a noncontrolling interest.

true alternative valuation techniques are necessary when actively traded prices are unavailable

The amount for the noncontrolling interest is reported in the consolidated balance sheet in the a. LT liab section b. LT asset section c. shareholder's equity section

c

After Entry I is done, the parent's balance in equity of subsidiary earnings should be eliminated by what percentage?

100%

When will the acquisition date fair values of the shares owned by the controlling and noncontrolling interest equal one another a. when the parent acquires its shares in the sub without paying a control premium b. when the per share price paid by the parent is representative of the acquiree's total acquisition date fair value c. when the acquired sub's shares are actively traded in an exchange market d. when the acquired sub's shares are not actively traded in an exchange market

AB

As part of the consolidation process which of the following are included in the calculation of the ending balance of the noncontrolling interest a. dividends from the sub attributable to the noncontrolling interest b. all sub dividends paid to either the controlling or noncontrolling interests c. the consolidated entity's net income attributable to the noncontrolling interest d. the balance of the noncontrolling interest as of the beginning of the period

ACD

Consolidation Entry S eliminates 100% of the sub's beginning of the period stockholder's equity accounts. In the presence of a noncontrolling interest, to what accounts is the total elimination allocated? a. noncontrolling interest b. sub's common stock c. parent company's RE d. Inv in subsidiary

AD

The allocation of goodwill across the controlling and noncontrolling interests a. doesn't always result in an allocation proportional to percentage ownership interests b. always results in all goodwill being allocated to the parent company c. proceeds in a similar fashion when the business combination resulted in a bargain purchase d. compares acquisition date total fair values to the relative (proportional) fair values of the sub's identifiable net assets

AD

For most cases, the best measure of a noncontrolling interest's acquisition date fair value is a. the market price per share paid by the parent for the acquisition b. the market price of the noncontrolling shares surrounding the date of an acquisition c. an estimate based on future income projections

B

What balances in the parent's column are brought to zero via consideration entries a. dividends declared b. equity in XXX earnings c. investment in pawn company d. goodwill

BC

T/F consolidation entry E doesn't vary depending on the controlling percentage of the sub owned by the parent

True

The extra price per share paid to ensure a controlling interest in a business combination is referred to as a ______ _____

control premium

The ending balance of the noncontrolling interest reported in a consolidated balance sheet includes a beginning balance, a portion of consolidated income, and a deduction for subsidiary ______ attributable to the noncontrolling interest

dividends

Because it is an intra-entity transfer, the portion of a sub dividend payable to its parent company is ____ in consolidation

eliminated

Consolidated RE equal the parent's RE when the parent accounts for its Investment in Subsidiary using a. the partial equity method b. the equity method c. the initial value method d. fair value method

equity method

Despite the fact that 100% of a controlled sub's assets and liabs are consolidated with those of a parent in consolidation, only the parent's percentage ownership is used for internal accounting under the ____ method for sub income accruals

equity method

Regardless of its percentage ownership, when a parent acquires control over a subsidiary, the parent must recognize the noncontrolling interest at its acquisition date _____ value

fair

The valuation principle for reporting the acquisition date amount of a non-controlling interest is ____ value

fair

As long as control is maintained, when a parent sells a portion of its ownership shares in its subsidiary, no _____ or ____ is recognized in consolidated income

gain or loss

When the sum of acquisition date fair values of the controlling and noncontrolling interests exceeds the collective acquisition date fair values of the sub's identifiable net assets, then the acquiring company recognizes _____`

goodwill

consolidation entry A2 is required when ____ is disproportionately allocated to the parent and noncontrolling ownerships

goodwill

Consolidation entry A2 focuses on valuation and allocation of which of the following accounts? a. parent's separate identifiable net assets b. goodwill only c. sub's identifiable net assets only d. sub's goodwill and its identifiable net assets

goodwill only

Consolidation entry I represents part of a sequence of worksheet entries that bring the investment in sub account to a _____ balance

zero

A parent company owns 80% of the voting stock of a sub. What percentage of the sub's revenues and expenses are consolidated?

100%

Which of the following items enter into the computation of net income attributable to the noncontrolling interest? a. the noncontrolling interest's ownership percentage in the sub b. excess acquisition date fair value amort c. the parent company's net income d. the sub's net income

ABD

On the consolidated balance sheet, dividends paid to the noncontrolling interest a. reduce the noncontrolling interest balance b. reduce consolidated RE c. have no effect on the noncontrolling interest balance

a

T/F when computing consolidated net income and a 20% noncontrolling interest is present, 100% of the parent's net income plus 100% of the sub's net income adjusted for excess acquisition date fair value amortizations

true

On a consolidation worksheet, the noncontrolling interest's share of sub dividends declared a. serve to increase the noncontrolling interest balance b. reduces consolidated RE c. has no effect on the noncontrolling interest balance d. serve to reduce the noncontrolling interest balance

d

When the acquisition date subsidiary fair value per share is ____ for a parent company and the noncontrolling interest, then goodwill is allocated proportionately across the two ownership interests

equal or same

The relevant criterion for the requirement to prepare consolidated financial statements is whether one company ____ the decision making process of another company

controls

Under the acquisition method, the ______ _____ concept calls for a parent to consolidate 100% of a controlled sub's assets and liabilities despite owning less than 100% of the sub's voting shares

economic unit

Because it is an intra-entity transfer, the portion of a subsidiary dividend payable to its parent company is _____ in consolidation

eliminated

The controlling interest's share of consolidated net income is limited to its proportional ownership of the subsidiary's shares multiplied by the _____ net income adjusted for excess acquisition date fair value amortizations

subsidiary's

When a parent acquires a controlling, but less than 100% interest in a subsidiary, the basic elements for establishing an acquisition date subsidiary value include a. the FV of the controlling interest b. the FV of the noncontrolling interest c. the sub's carrying value of the noncontrolling interest d. only the consideration transferred by the parent

AB

When active trades are unavailable, which of the following are useful techniques for estimating the acquisition date fair value of a noncontrolling interest a. residual income projections b. discounted future cash flow estimations c. historical prices from past trades

AB

The computation of the NCI share of consolidated net income includes a. the NCI's proportional ownership of the sub's net income b. the NCI's proportional ownership multiplied by consolidated net income c. an adjustment for the NCI's share of excess acquisition date fair value allocation amortization

AC

When a parent pays a control premium in a less than 100% acquisition, a. a proportional amount of goodwill is allocated to the parent and noncontrolling interest based on ownership percentages b. all goodwill is always allocated to the parent company c. more goodwill will be allocated to the parent than to the noncontrolling interest relative to their proportionate ownership percentages

C

When a parent company employs the equity method, consolidation Entry D eliminates subsidiary dividends attributable to the ____ company

parent

When the parent applies the equity method, which of the following balances are the same across the parent company accounts and consolidated balances? a. consolidated net income b. retained earnings c. current assets d. equity in subsidiary earnings

Retained earnings

Which of the following are reasons for one company to gain control over another with less than 100% ownership a. the parent firm may not have resources sufficient to acquire all of its subsidiary shares b. some outside owners of the sub company may have been unwilling to sell their shares c. the laws of some countries prevent complete ownership by a foreign firm d. 100% ownership may result in a noncontrolling interest that seeks to control decision-making

ABC

Why does measuring the acquisition date fair value of a noncontrolling interest require estimation? a. once a controlling interest in a sub is acquired the remaining shares cease to trade b. noncontrolling interest shares are rarely actively traded c. the noncontrolling interest shares were neither bought nor sold as part of the acquisition d. noncontrolling interest shares typically have no observable value

C